INVOKING THE DOCTRINE OF ‘per incuriam’

[Mr. M. GOVINDARAJAN]

The Judgments of High Courts and Supreme Court are binding on the lower courts.   Whether the judgment of the higher authorities can be ignored or impugned? One such way is the invoking the doctrine of ‘per incuriam’

‘Per incuriam’ and sub silentia are exception to the concept of ‘stare decisis’. Sir John Salmond in his ‘Treatise on jurisprudence’ has aptly stated that the circumstances under which a precedent can be treated as ‘per incuriam’.   A precedent is not binding if it was rendered in ignorance of a statute or a rule having the force of statute or delegated legislation.

The rule apparently applies even though the earlier court knew of the statutes in question but it did not refer to and had not present to its mind, the precise terms of the statute.   Similarly a court may know of the existence of a statute and yet not appreciate its relevance to the matter in hand, such a mistake is again such ‘incuria’ as to vitiate the decision.   Even a lower court can impugn a precedent on such grounds.

C.C.K. Alien in ‘Law in the Making’ (Page No. 246) analyzed the concept of ‘per incuriam’.   ‘Incuria’ means literally ‘carelessness’ which apparently is considered less uncomplimentary than ignorantia; but in practice ‘per incuriam’ applies to mean ‘per ignorantiam’.   It would almost see that ‘ignorantia juris neminem excusat’ – except a Court of law, ignorance of what?   Ignorance of a statute, or of a rule having statutory effect which would have affected the decision if the court had been aware of it.

One of the exceptions to the principle of ‘star decisis’ is where the court gives a decision per incuriam because the provisions of a statute or authority of a case have not been brought to their attention.   The concept gets attracted either when an important provision of law eluded the attention of the Court or where the Court was allusive to such provision while rendering the decision.   Instances of per incuriam may also arise where the decision is rendered ignoring a binding precedent.

In ‘Dr. Reddy’s Laboratories Limited V. Commissioner of Central Excise & Service Tax, Hyderabad’ – 2013 (3) TMI 86 - CESTAT BANGALORE the CENVAT credit taken by the appellant during the material period was reversed in the wake of audit objection. The department issued show cause notice demanding interest on inadmissible CENVAT credit. The appellant contended that no credit has been utilized by them and therefore they are not liable to pay interest.   The Adjudicating Authority rejected the contention of the appellant and confirmed the demand of interest. The appellant filed appeal before the Commissioner (Appeals) who confirmed the demand.

The appellant filed the present appeal before the Tribunal. The appellant contended that the CENVAT credit in question was never utilized and that they were reversed before the issuance of show cause notice.   The Department relied on the Supreme Court’s judgment in ‘Union of India V. Indo Swift Laboratories Limited’ – 2011 (2) TMI 6 - Supreme Court in which the Supreme Court held that the interest is liable to be paid on the inadmissible credit even though it had been reversed.

The appellant contended that the High Court, in ‘Commissioner, LTU, Bangalore V. Bill Forge Limited, Bangalore’ – 2011 (4) TMI 969 - KARNATAKA HIGH COURT has distinguished the Supreme Court judgment in ‘Indoswift’ case.

The Department contended that the ruling of the Supreme Court is binding on all courts and authorities in the country.   The Department further contended that the basic provisions were overlooked by the High Court and it is not a good precedent to be followed.   Obviously the concept of ‘per incuriam’ is being invoked against the High Court’s decision.

The Tribunal held that the doctrine of ‘per incuriam’ is applicable against a judgment rendered in ignorance of any statutory provisions.   It is applicable even in a case where the court which passed judgment was aware of the statute but the precise terms of the statute were not present to its mind. The finding of the High Court in ‘Bill Forge’ case that the CENVAT credit is taken at the time of removal of the product does not take into account of Rule 3(1) of the CENVAT Credit Rules, 2004 which provides for the ‘taking’ of CENVAT credit by a manufacture of excisable goods or a provider of taxable service upon receipt of inputs, input service and capital goods in the factory premises.   There is no question of set off or adjustment at the time of taking of credit.   The provisions of Rule 3 are clear to this effect but the same did not enter into reckoning when the High Court decided the case of ‘Bill Forge Limited’. Where a manufacturer or a service provider was required by the Revenue to pay interest on an amount of CENVAT credit taken (though inadmissible) and later on reversed without utilization for the period from the date of credit taking to the date of reversal, Rule 14 would be rendered otiose, which is definitely not the legislative intent.   In other words, a finding in the context of examining interest liability under Rule 14, to the effect that reversal of CENVAT credit amounts to non taking of credit militates against the rule itself.   In this view of the matter the Tribunal held that the doctrine of ‘per incuriam’ is applicable against the decision in ‘Bill Forge Limited’ case.